Bitcoin Price Drops Below $66,000: 4 Main Reasons

1 Long Liquidations

The main force behind today’s Bitcoin price drop was a major deleveraging event, characterized by unusually high levels of long liquidations. Prior to the downturn, Bitcoin’s open interest (OI) weighted funding rate was unusually high, indicating that leveraged traders were paying a premium to maintain long positions in anticipation of future price increases. However, this optimism made the market vulnerable to abrupt corrections.

2 DXY Pressures Bitcoin

Yesterday, the DXY closed at 105.037, its highest level since November, indicating a stronger U.S. dollar. Given that Bitcoin and DXY are negatively correlated, a stronger dollar could shift investors’ preference for safer assets away from riskier investments like Bitcoin. This correlation stems from risk sentiment in global markets, with a rising U.S. dollar index typically signaling a flight to safer investments, undermining investment in riskier assets like Bitcoin.

3 Investor Profit Taking

Investor profit taking has also played a major role in the recent price correction. Bitcoin on-chain analytics platform Checkonchain reports a surge in profit-taking activity. Sharing insights via X, Glassnode’s lead on-chain analyst Checkmatey said: “The classic Bitcoin MVRV ratio meets the criteria we call ‘overheated, but not yet overdone.’ MVRV = above +0.5sd but below +1sd. This suggests that Bitcoin holders on average have a large amount of unrealized profits, prompting increased spending.”

4 Bitcoin ETF Outflows

Finally, the market witnessed significant outflows from Bitcoin ETFs, marking a reversal from last week’s massive inflows. The total outflows in a single day amounted to $85.7 million, with Grayscale’s GBTC seeing the largest outflows at $302 million. Meanwhile, Blackrock’s IBIT and Fidelity’s FBTC reported positive inflows, totaling $165.9 million and $44 million, respectively. WhalePanda commented: “Overall, this was a negative day, but not as negative as the price would suggest. The first quarter is over, so it makes sense to take profits here. Some confusion around the new quarter and halving is to be expected.”